Loophole Causes Bed Problems

June 16, 2003
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LANSING — Hospitals across Michigan are now free to relocate inpatient beds to sister facilities under a statute that legislators mistakenly believed was intended to only affect Detroit.

Instead, the rewrite of Michigan’s Certificate of Need law enables a hospital to move licensed inpatient beds, provided certain conditions are met, from one facility to an existing ambulatory center within a state-designated health service area.

The provision took effect Sunday after the state’s 11-member Certificate of Need Commission — caught up in a loophole in the law and fears of personal liability because of the state Attorney General’s unwillingness to defend them in court if legally challenged — last week declined to act on an opportunity granted by lawmakers to repeal the provision.

The concern of some CON commissioners and others is that the provision will trigger a potential proliferation of hospital bed relocations around the state without any public review and result in higher health care costs for employers.

One commission member from West Michigan hopes that lawmakers, who believed that the provision would only allow for the relocation of 400 or so beds in the Detroit area, and not the potential for thousands of bed transfers statewide, will revisit the issue and avoid any “unintended consequences” of their actions.

“I would think they would be eager to make a change,” said Jack Smant, a Republican CON commissioner from Grand Haven.

There’s also a good possibility the issue may end up in court, as hospitals opposed to the bed relocation language and movement of beds into their turf in suburban Detroit consider legal challenges to the law.

“There is thought that there might be some challenges. From somebody, it’s likely, in my opinion,” said Mike Killian, director of marketing for William Beaumont Hospital in Royal Oak, a suburb of Detroit.

In West Michigan, the region’s largest health care provider has no immediate plans to examine relocating beds from one campus to another.

“I wouldn’t say never, but we’re not planning anything. Not in the immediate future, no,” said Spectrum Health President and CEO Rick Breon, himself a recent appointee to the CON Commission.

The crux of the issue stems from lawmakers’ rewrite of the CON law during the waning days of the lame-duck legislative session.

During the process two Detroit hospitals — Henry Ford Health System and St. John Health System — successfully lobbied for language in the law that would allow them to relocate inpatient beds from the inner city to new hospitals they plan to build in more lucrative suburban markets in neighboring Oakland County. Doing so, they say, would improve the payer mix for the health systems, which are beset with high Medicaid and uninsured populations in Detroit that result in heavy financial burdens.

Profits for the new suburban hospitals would help to partially offset losses on operations within Detroit, executives from Henry Ford and St. John health systems say.

While accommodating the Detroit hospitals already had opposition — mostly from health care systems based in Oakland County, such as Beaumont, who claim that too much capacity already exists in the market — the issue has broader statewide significance and raised objections from elsewhere.

The concern is that hospitals, seeking to mine more lucrative markets, would create additional capacity where none in needed, resulting in a duplication of services and ultimately driving up costs. Compounding those fears is that under the present law, hospitals could embark on a one-time movement of beds without the typical public review process or market justification that CON prescribes for new health care facilities.

“Purchasers and consumers need that review process to determine when and if new hospitals should be initiated and current hospitals should be expanded. And those determinations should be based on the overall need of the local communities to be served, and not the particular interests of the sponsoring health systems,” said Martin Johnson, chairman of Grand Haven-based JSJ Corp. and co-chairman of the Economic Alliance for Michigan, a labor-business coalition.

CON commissioners appeared willing to remove the provision in the law that allow hospitals to move inpatient beds, but their effort was short-circuited on a variety of fronts.

The law, as enacted by legislators, gave the commission the ability to act by June 15 to delete the provision once the panel was expanded this year from five to 11 members and the six new members were appointed by the governor and confirmed. The stickler comes in the definition of “confirmed.”

Based on the interpretation of Assistant Attorney General Ronald Styka, the CON Commission’s legal counsel, “confirmed” means after a 60-day confirmation period following an appointment expires, and not a specific action by the state Senate. His opinion, which contrasted from the majority counsel for the Republican-controlled Senate, left the commission without the six new confirmed members required and unable to act by Legislature’s June 15 deadline.

Styka urged the commission to “follow the law” and not even vote on whether to repeal the bed relocation provision. He also questioned the constitutionality of the Legislature giving away its authority to the CON Commission.

“You’re in a box you can’t get out of,” Styka told commissioners.

Adding to the commission’s split 6-5 vote not to consider the matter was a decision from the Attorney General’s office that came the day before last Tuesday’s meeting to not represent the panel or its members if the issue were litigated, a move that conceivably would leave commissioners personally liable for any decision.

Smant believes concerns about personal liability swayed enough commissioners to leave the issue alone.

“It all changed the last day because of the communication we received,” Smant said. “I’m quite sure that did have an impact.”

The commission’s reluctance to act leaves the bed relocation provision intact, and the issue squarely in the hands once again of lawmakers, if they choose to even consider it.

“As it stands now, it is wide open,” said Jan Christensen, interim legislative liaison with the Michigan Department of Community Health. “To simply let it go leaves it wide open and the transfers will happen.”

CON commissioners, after opting not to act on the bed relocation provision, did vote to propose and send for public comment standards for the Legislature to consider to narrow the provision and provide criteria for bed relocations.

Some commissioners saw the need to move quickly to offer lawmakers a proposal, while others preferred to wait a few months.

Spectrum’s Breon said he preferred to gauge the fallout first outside of the Detroit market before acting.

“On the west side of the state we’re going to have to look at the implications of all this. We need some time to evaluate it,” Breon said.           

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